Section 166 — Corporation Tax Act 2010: Proportion of assets available for distribution to which company is entitled

Proportion of assets available for distribution to which company is entitled 166 1 This section applies for the purpose of determining the proportion to which a company (“company A”) would, at any time, be beneficially entitled of any assets available for distribution to the equity holders of another company (“company B”) on a winding up.

2 The proportion is the proportion to which company A would, at that time, be beneficially entitled if company B were to be wound up and on that winding up (“the notional winding up”) the value of assets available for distribution to company B's equity holders were equal to—

a the assets amount minus the liabilities amount, or b if the assets amount does not exceed the liabilities amount or if company B's balance sheet is prepared to a date other than the end of the relevant accounting period (see section 168), £100.

3 The “assets amount” is the amount of company B's assets as shown in its balance sheet as at the end of the relevant accounting period.

4 The “liabilities amount” is the amount of company B's liabilities as shown in that balance sheet but excluding liabilities to equity holders as such.

5 If, on the notional winding up, an equity holder would be entitled as such to an amount of assets which (apart from this subsection) would not be a distribution of assets, the equity holder is nevertheless treated as entitled to the amount on the distribution of assets on the notional winding up.

6 Subsection (7) applies if—

a an equity holder (“E”) of company B provided new consideration for any shares or securities in company B in relation to which E is an equity holder, b company B makes a loan to E or any person connected with E or acquires shares or securities in E or any person so connected, and c in making that loan or acquiring those shares or securities, company B applies, directly or indirectly, an amount (“the returned amount”) corresponding to the whole or any part of the new consideration.

7 The following amounts are to be reduced by the returned amount—

a the assets amount, and b the amount of assets to which E is beneficially entitled on the notional winding up.